The key is to take a proactive role in your retirement planning. Naturally, the sooner you begin planning, the more you increase your chances for early retirement. Some retirees may require as much as 80% of their pre-retirement income to meet expenses and maintain their desired standard of living. With the decline in the popularity of traditional pensions, people today are more and more responsible for funding their retirement.
There are many factors that are redefining how Americans approach retirement. Due to financial necessity, or sometimes just an overabundance of leisure time, some retirees are beginning to reenter the workplace. Many retired executives start their own part-time consulting businesses, others trade in their hectic seventy-hour work week for a type of pseudo-retirement, in which they work a lot less, and spend more time with their families. Part-time work during retirement can be an important income supplement, especially if you plan on retiring early.
Another interesting factor changing the shape of retirement is that life expectancies are increasing. For some, spending one-third of their lives in retirement is a possibility. Relying on retirement plans and Social Security will be increasingly difficult because these retirement mechanisms were not designed to perpetually provide income. Furthermore, as longevity has increased, over time, retirement plans have gradually shifted the savings responsibility from employers to employees. The pressure of building adequate retirement savings has been placed directly in the hands of a larger portion of the work force, who often must take initiative and contribute to their company sponsored retirement plans. Your retirement assets, as well as your personal savings, will have to work longer and harder to help fulfill your personal objectives, regardless of whether you retire early or not.
An often overlooked aspect of retirement planning is money management once retirement has begun. To help ensure an adequate pool of retirement assets, your money will have to continue working for you throughout your retirement years. Inflation—along with the amount of income withdrawn from your retirement plan—will have a direct effect on how long you can live comfortably. Thus, personal savings will continue to be an overall part of your financial plan.
Budgetary constraints will also determine your retirement lifestyle. In order to better ascertain your financial picture, it is best to project what your retirement income and expenses will be. Unfortunately, this process may be more difficult than it sounds. You will need to consider everything from greens fees at the local golf course to health insurance costs. In addition, you will have to factor in inflation and how your income needs will change throughout the years.
For those who desire an early retirement, certain penalties may apply for early withdrawals from retirement plans. All options need to be studied and the consequences of any action taken should be reviewed by a professional.
Today, early retirement is still a viable possibility. Remaining on firm ground financially and, working part-time if necessary, have become integral parts of a successful retirement. By maximizing your personal savings to the best of your ability, you will increase your chances of reaching your retirement goals. Remaining active and focused on attaining your retirement planning goals is particularly necessary if you are contemplating, or are forced into, early retirement.